Bears on top.... Admittedly bears have won another day where were successful in breaking the bulls back. More than 1 crs shares buying was seen in RIL and RPL in last 1 week yet the seller had more strength on the given day. Macquarie one foreign broking house has sold stocks worth Rs 500 crs plus today. Though few FII and foreign broking houses have gone on record saying that they will come forward for buying at 12000 it seems very clear that a borrow and sell strategy of the bears have succeeded in current scenario. The market has been falling since last Friday the day 11% inflation was announced and the fall is 12% over and above the 30% fall though the growth rate might taper by less than 10%. The same speed may take maximum of another 3 to 4 days to test 12000. I think if the next Govt which comes to power is not UPA then they should first think of band in share market first instead of price band mechanism in oil. We are for sure exposed that our systems are still easy to manipulate on either side and too at will. Congress very firmly announced to go ahead with Nuke deal as well as elections. This once again brings ruling party at a stage where LEFT will withdraw support yet Govt will not fall as S P will support. Political scenario is not that bad for market to over react. Oil may not hurt too long to India as RPL oil production will start soon and RIL will get enough gas to convert major oil consumption to gas. Market has been over reacting to all the negative things which have come to fore and at present the PE ratio has come to as low as 11. Even if economy is slowed a bit the valuations are already done with. FII which have been respected in India as God’s are the most dangerous animals to kill the country’s strength. If we are trader and prepared to take risk in equity then only trade in futures or just stay away from trading. I think we have been repeating this since 2005 that futures is not cup of tea of normal investors. Few bears are also circulating emails that Nifty is set to touch 2500. I am flashing this because those who still feel that it is bear run and Nifty is set to travel to that levels must join bears and start selling. They may sell IFCI till it become Rs 10. We have no problem. We are bull’s side and will remain so. Those who feel that they are misguided must exit from our site. In fact, I read an article today where it states the FII have sold stocks worth 7 bn USD by lending it to a cartel. The stocks were lying in P notes. If it true then we are most idiots to allow P note which is used for stock manipulations. Any way it is very difficult to prove unless Govt agencies step in to find out the truth. In any case, if it is true the covering will also be equally strong. At present traders are set their eyes on OIL God the LAGAAN way. It is not so simple. Whenever oil satta break it will be a vertical fall. It could take some more time before the speculators give up. Traders must go long only in selective of 4 to 5 scrips so that they can withstand the downside. While entering it they should know that market at present is being hammered intentionally be bears so that nobody dares to come back this market for next decade. If you survive the onslaught then you could able to participate in the upside rally. Those too only strong traders should do it. All broking houses will shut down very soon as the retail participation has come to naught. Only HNI who has not leveraged positions like IDEVELOP itself have survived in this market and will always survive. Wherever we find value we are still buyer and we will remain buyer. We always believe that buying should be done only in such times. Meanwhile value buying can be done in only in select counters where you feel that the returns will be nothing less than 10 times on DCF valuation. Follow your bliss and the universe will open doors for you where there were only walls.

Half Empty Half Full It is absolutely true that the growth will taper as a consequence of the CRR rate hike. But market knew it that it could happen and market has corrected 1400 points in last 4 sessions alone on this pretext. GDP was factored in as low as 7% by all FII’s in India and therefore if the CRR rate hike brings down GDP from 8.5% to 7.75% how does it matter…? At 12 PE 09 market has factored in all these negatives and now from hereon if market has to fall then more negative news has to come. If inflation becomes 13% then you can’t stop from market going to even 12000 and if inflation touches 15% then even 9000 is possible. What are the probabilities…? Inflation rose from 8.75% to straight to 11% purely on account of rise in petrol. Now that another petrol price hike is impossible before elections and hence the most of the negativity has been factored in. The real inflation on of food was nominal. Only rise which can come this week is on account of consequential rise in transport cost and other costs due to increase petrol could rake inflation by another 50 basis point. Thereafter inflation has to fall and it will fall. Yesterday the white house discussed a plan to intervene oil speculation by introducing margin and other constraints. Their estimate is that they can bring down the oil to as low as 70 USD in less than 30 days. Whether this will happen or not in such as short span of time I am not sure. But I had predicted 72 USD by March 09 and I precisely believe that this will happen. Now white houses as well as at least dozen foreign analysts too are singing the same tune. What will happen if this happens...? Will Govt reduce the petrol prices by Rs 5 or more in view of election……..? If this happens then will Sensex touch again 20000 with almost zero ownership patterns? The mad sellers so far in India could turn out to be buyers again. This is future which is nobody knows…? The present also suggest the enough damage is already done and we are at the rock bottom end if not at the exact bottom and hence risk raking is must for traders as well as informed investors. Those who go with the wind will never find place in equity market and ideally they should choose MF route and RIL MF is the best outperforming fund at present. Not because they have not earned much but simply because they preserved the cash which they are now deploying heavily. In comparison to others they will outperform in any given market because of their corporate image and support. The heaviest short counter in today’s scenario is J P Associates. Each and every technical expert has sell on this co whereas fundamentally the stock is going at just 10% of their intrinsic value. In pull back this stock will definitely outperform. The average person puts only 25% of his energy and ability into his work. The world takes off its hat to those who put in more than 50% of their capacity, and stands on its head for those few and far between souls who devote 100%

Deal will come to Parliament, allow us to go to IAEA, NSG: PM Prime Minister Manmohan Singh today offered to bring the controversial Indo-US nuclear deal to Parliament before operationalising it provided the government is allowed to complete negotiations with IAEA and NSG. Noting the concerns about the deal, he said "I agree to come to Parliament before I proceed to operationalise (the deal). What can be more reasonable than this?" Breaking his silence on the nearly fortnight-long standoff between the UPA and the Left parties on the issue, he told senior journalists "If Parliament feels you (government) have done some wrong, so be it." "All that I want is the authority to proceed with the process of negotiations through all stages like the IAEA and NSG that will not not tie down the hands of the country," he said in reply to questions at his residence after he launched the National Action Plan on Climate Change. Playing down the Left parties' threat of withdrawal of support if the government went ahead with the deal, Prime Minister said there was nothing new in what they said but hoped that the government would be able to address concerns of all including the Left parties on the deal. When asked speculation over the possibility of early polls because of political problems over the deal, Singh said "I don't see elections". Initially the Prime Minister, who appeared relaxed despite the political stalemate, said he would not not like to speak on the nuclear issue maintaining that silence was better but later came out with his comments in reply to questions. "I have said it before. I will repeat it again that I have told them (Left) you allow us to complete the process. Once the process is over, I will bring it before Parliament and abide by the House," he said. PTI

Fuel price hike led to double digit inflation: FM Inflation for the week-ended June 7 is at 11.05% Vs 8.75%. Inflation at 13 yr high The finance ministry had cautioned the cabinet about the effect of raising fuel prices on India's inflation, Finance Minister P. Chidambaram said here on Friday soon after inflation reached 11.05 percent. He also hinted at stronger monetary measures. As inflation for the week ended June 7 hit a 13-year high, Chidamabaram told reporters: "The increase in petroleum product prices has contributed 94 percent to the inflation recorded." The central government had on June 4 raised petrol prices by Rs.5 a litre, diesel by Rs.3 and cooking gas by Rs.50 a cylinder. "Double digit inflation was expected after the government decided to increase fuel prices," Chidambaram said. "We had cautioned the cabinet about this."

Inflation the Villain One more field day where inflation made major dent to the sentiments of investors. Market was expecting 10.2% whereas I was expecting 9.8% and the actual no has come 11.05%. I think Indian economy is growing at pace larger than anybody’s expectations which is reflected in inflation rise. The question is whether all the negative has come in one week and this inflation is topped one….? Or will it rise to 12% next week…? Some political hiccups could resolve this embargo… It seems Madam Sonia has patched up with S P which was reflected in the SC battle and then solution through RBI in a leading gr’s case where SP has a large say. This equation was enough to call cards on N deal which Madam did call. Left too know this position and at the most can dare to just walk out and withdraw support but have lost the power to destabilize the Govt. Neither NDA nor Left would like to take the debit of destabilizing the Govt just ahead of elections. Therefore at least political front now seems to be alright. Market reaction to 11% inflation in not fully unwarranted. But at the end of the day market run on positions and most of the traders are short in the market. Nifty O I stands at 11.50 cr shares and put alone accounts for 5 cr plus and futures at 4 crs shares which means the PCR is as high as 3 which makes me to compare market with the 1.28 lac crs position in Dec 07 on long side. The boat is over tilted on one side and hence it has to sink with all passengers on board too will sink. It is better to travel next time. I mean either take calculated risk and go long where the risk reward will remain in your favour irrespective of all odds at the moment. Alternatively just stay away from the market. But do not be on selling side. So far we have seen only worst and worst factors and now it is time to see good factors surfacing from hereon. Next week itself oil will start falling. Suadi may raise oil production whereas Iraq too ready to supply oil after Osaba promised to withdraw troops from Iraq. The 190 bn USD satta in oil is unsustainable and will break any time. Monsoon is on track which will bring down food prices in next 2 months. This will control inflation. N deal will be a pleasant surprise. This was the last shock I was expecting which will set all speculation at rest. Since market has decisively breached 14700 which was never envisaged there is possibility of another 500 to 700 points downside if my projections of oil falling steeply does not come through. If oil falls then chances today’s low could make a bottom. Yet I would stick my neck in taking risk at this level so that my risk reward ratio remains in my favour. This has given vibrant impact only because this was timed along the rollover dates. Only Rs 14000 crs OI is rolled over out of Rs 86000 crs and just 4 days left for doing the same. The lack of buying depth will not allow to rollover positions at very low carrying cost. There will remain huge upside irrespective of huge inflation nos. If oil is sustaining at these levels then at least one co needs mention is Minda which will the largest beneficiary. Honda came out to announce a hybrid car for Rs 22 lacs in order to resolve the oil issue. Tata launched new CNG car and Martui too launched 800 cng version. Toyato has announced Innova and Corrola with CNG im Mumbai and Delhi. The excise differential of 8% for hybrid car makes CNG kit free rather lower than the normal car. I think the expected top line from CNG kit could be close to Rs 600 crs which will be added in MAGL in which Minda holds 23% stake. This is a high margin biz which is making some investors to consolidate holding in this co. Counter has completely dried up and chances of flare up is not ruled out. I am not trying to boost the stock but for sure it shows that this stock has failed to buzz in any falling market. Yet only long term investors should hold this stock. Jeyswal Neco reported net profit of Rs 86 crs which is stunning. At cmp of Rs 47 it trades at pe of 5 and based on 09 estimates it is at 2 pe which makes a very strong case of investment. You cannot live on other people's promises, but if you promise others enough, you can live on your own

MEDIUM TERM COUNT Market goes to 12500

The break of the A-B trendline and failure to go beyond the long term trendline both were indicative that the previous low of 14677 seen in March will break. Last week we went marginally below that but did not sustain there. The weekly lower Bollinger band at 14640 provided support. Last week i mentioned that if market halts there it could attempt splitting wave C into wave IV of C with a rally to 15750 odd possible. For this 15400 would have to be crossed. The candle pattern last weeks chart called 'on neck line' I have seen on 3-4 ocasions and each one was followed by an exhaustive last sell off in the next week before a bottom formed. So that indicates that soon 14650 will get tested again before a possible rally in the market.

11% Inflation shock; lowest close for mkts since Aug 07

Inflation in double digit has bruised the markets very badly; the Sensex lost over 500 points. Blood-thirsty bears marched harshly on bulls and remained active through the day. The Sensex and Nifty hit new 2008 lows; it was lowest closing for both indices since August 2007. Indices of rate sensitive sectors like Bankex, Realty and Auto also touched new 2008 low. Advance:Decline ratio was pathetic. All BSE indices battered severely. Experts say that RBI will have to use monetary tools to contain inflation.

Inflation Internals
Fuel, power, lubricants	7.80%
ATF prices	14%
Diesel	21%
LPG	20%
Naptha	17%
Furnace Oil	15%
Food articles	-1.10%
Non-food articles	1.40%
Manufactured pdts	0.30%
Edible Oil Major Gainer
Sunflower oil	6%
Groundnut	3%
Soybean/vanaspati	2%
Mustard seed	4%

Wholesale Price Index for the week ended June 7 stood at 11.05% as against 8.75% in earlier week. This is way above markets' estimation, which was expected around 9.93%. It is at 13-year high; last time inflation touched a high of 11-11% in May 1995. Inflation for April revised to 7.95% versus 7.33% earlier.

Oil price hike, which declared on June 4, 2008, was the main reason behind this higher inflation. Commerce Secretary says that they see high inflation for next 2 months and will consider food grain, vegetable price control to contain inflation.

Finance Minister says, "Rise in inflation was expected and we will have to look at stronger steps on fiscal, monetary side. Hike in petrol price is unavoidable."

Analysts feel that fuel price hike has not fully reflected in inflation numbers. It will see more impact in the next few weeks. They expect that the RBI will hike CRR or Repo rate before Monetary Policy. It will affect growth in infrastructure sectors as capital availability become scare, squeeze banks margin and impact on auto sales.

Moody's says, "RBI looks set to further tighten Monetary Policy and not to wait until next formal review. Inflation and tightening monetary policy will weigh on investor sentiment."

Broader indices have shattered completely and hit new 2008 lows again in just 10 days after June 10. The Sensex and Nifty hit new 2008 lows of 14,519.27 and 4333.60, which broken earlier lows of 14645.3 and 4369.8. Volumes were very high today; total turnover traded by the markets stood at Rs 85088.58 crore. This includes Rs 21056.2 crore from NSE Cash segment, Rs 58533.66 crore from NSE F&O and the balance Rs 5498.72 crore from BSE Cash segment.

The Sensex crashed nearly 569 points and the Nifty 171 points while touching day's low. The Sensex closed at 14,571.29, down 516.70 points or 3.42% and the Nifty at 4347.55, down 156.7 points or 3.48%. All BSE and NSE indices closed in red. ONGC is the only stock, remained strong through the day.

Amongst frontliners, Zee Entertainment was down -8.45%, Reliance Communication -6.68%, Reliance Ind -6.63%, Hindalco -6.39% and Jaiprakash Associates -6.03% while ONGC was up 1.56%.

Market breadth was weak; about 514 shares have advanced while 2328 shares declined. Nearly 284 shares remained unchanged.

Realty Index was the worst hit and hit new 2008 low. Index fell by 250.79 points or 4.45% at 5,383.81 due to huge selling in HDIL, Akruti City, Sobha Developers, Parsvnath, Indiabulls Real, DLF, Omaxe and Unitech.

Metal stocks like NALCO, Hindalco, Tata Steel, Sesa Goa, Jindal Steel, SAIL and Sterlite Ind lost shine. Index was down 603.80 points or 3.99% at 14,528.06.

Bankex lost 208.40 or 2.97% to settle at 6,804.78. Major losers were Bank of India, Bank of Baroda, IOB, SBI, Union Bank, Kotak Mahindra, ICICI Bank and HDFC Bank. Deutsche Bank says, "We see another 1/2 quarter of double-digit inflation and more RBI tightening."

Oil & Gas stocks took huge beating; Index fell 5.03% or 498.96 points at 9,419.89 as selling pressure seen in RNRL, Essar Oil, Reliance Ind, Cairn, GAIL and BPCL. Reliance Industries has hit new 2008 low and closed down by 6.63% at 2,099.20.

FMCG Index went down 2.51% at 2,234.23 on the back of weakness in GSK Consumer, United Breweries, Colgate, HUL, ITC, Marico and Dabur India.

Power stocks like Torrent Power, Reliance Infra, Reliance Power, Power Grid Corp, Tata Power, NTPC, CESC and Suzlon Energy have lost ground. Index plunged 2.5% at 2,539.84.

Auto stocks like TVS Motor, Bharat Forge, Hero Honda, Ashok Leyland, Tata Motors, Maruti Suzuki and Punj Tractors lost the road. Index was down 101.27 points or 2.44% at 4,042.86. Ashok Leyland says that such high inflation may result in incresae in interst rates; CRR hike will affect the CV industry and overall industry.

IT Index also caught into bears' grip, lost 101.28 points or 2.35% at 4,204.62. Major losers were Satyam, Patni Computer, Tech Mahindra, Wipro, TCS, HCL Tech and Infosys. S Gopalakrishnan of Infosys says that higher inflation will increase the cost of doing business.

Capital Goods stocks also hammered a lot. This includes Gammon India, Praj Industries, Siemens, Rel Ind Infra, Crompton Greaves, Punj Lloyd, BEML, Bharat Elec, ABB, L&T and BHEL. Index fell 267.90 points or 2.3% at 11,399.79. Lanco Infratech says that Inflation concerns are in the direction of interest rates and rising rates will be a concern for the infrastructure sector as a whole. They see hardening of interest rates by 50 bps from now.

Pharma stocks like Piramal Healthcare, Sun Pharma Adv, Aurobindo Pharma, Matrix Labs, Biocon, Dr Reddy's Labs, Wockhardt, Cipla and Ranbaxy Labs lost ground. Index fell 101.52 points or 2.29% at 4,325.40.

Midcap Index slipped 3.17% or 197.74 points at 6,032.43. Amongst midcap stocks, UB Holdings, Gammon India, Rajesh Exports, Corporation Bank, National Fert, BGR Energy, IFCI, Akruti City, Piramal Healthcare, Walchandnagar, Torrent Pharma, Deccan Aviation and Usha Martin were down over 7%.

In the small cap segment, Sical Logistics, OCL India, ETC Networks, Rain Commodities, Suprajit Eng, Hind Nat Glass, English Ind Cla, Arrow Webtex, Tata Metaliks, Automotive Axle, Zenotech Labs, Gayatri Project and Panchmahal Stee crashed over 9%. Small Cap index fell 262.76 points or 3.43% at 7,397.66.

Most active counters on the bourses were Reliance Industries, L&T, Reliance Comm, Ranbaxy Labs, ICICI Bank and HDFC.

On weekly basis, the markets smashed out cruelly. Sensex plunged 4% and the Nifty 3.7%; respective indices slipped nearly 1200 points and 325 points from weekly highs. BSE Capital Goods, Oil & Gas, Realty and Metal Indices were down 5%. Reliance Industries lost -7.5%, Bharti Airtel -6%, Reliance Communication -9.5%, TCS -5% and DLF -4.5%.

On the global front, Asian markets ended mixed; Nikkei was down -1.33%, Taiwan Weighted -1.8%, Hang Seng -0.23% and Kospi -0.56% while Shanghai was up 3.01% and Straits Times 0.31%. European markets were trading flat, at the time of writing market report.

Markets Snapshot

• Sensex, Nifty hits new 2008-lows as inflation accelerates to 11.05% at 13-year high
• Lowest closing for Sensex, Nifty since August 2007
• Sensex ends down 516.7 pts at 14571.2; Nifty down 157 pts at 4347.5
• RIL hits new 2008 lows; closes down 6.6% at 2100
• CNX Midcap Index down 3.4%, BSE Small-cap Index down 3.4%
• All BSE Sectotal Indices end in the red
• BSE Oil & Gas Index down 5%; RIL down 6.6%, Cairn India down 5.6%
• BSE Realty Index down 4.5%; DLF down 4.3%, Unitech down 2.4%
• BSE Metal Index down 4%; Tata Steel down 4.8%, SAIL down 3.3%
• Index Losers; Zee Ent down 8.5%, R Comm down 6.6%, Hindalco down 6.4%, Nalco down 6.3%, Tata Comm down 6%
• Loser; Pyramid Saimira down 20%, SICAL Logistics down 16.6%, OCL India down 13.5%, Rain Comm down 10.6%
• Loser; IFCI down 8.2%, GHCL down 8.8%, Sasken Comm down 7.9%, Indiabulls Fin down 8.4%, HDIL down 9.3%
• NSE Advance Decline at 1:11
• Total market turnover at Rs 85088 cr Vs Rs 56589 cr on Thursday
• F&O turnover at Rs 58533 cr Vs Rs 42696 cr on Thursday

F&O Snapshot

• Nifty July futures end at 20 pts discount; June ends flat
• Nifty July futures add 30 lakh sharees in OI; add 43.7 lakh shares in June series
• Fresh shorts seen across realty, banking
• Unwinding seen in momentum stocks
• Nifty June 4500 Call adds 7.5 lakh shares ; 38% OI buildup
• Nifty June 4400 Call adds 5.8 lakh shares; 58% OI buildup
• Nifty June 4300 Call adds 5.65 lakh shares
• F&O Stocks
  RPL down 5%; add 38.5 lakh shares in July series
  Ispat down 5%; add 27.5 lakh shares in July series
  IFCI down 8%; add 20 lakh shares in July series
  TTML down 5.2%; add 18.8 lakh shares in July series
  RNRL down 6.6%; add 15.2 lakh shares in July series
  Parsvnath down 6.5%; add 12.8 lakh shares in July series
• Rollover
  Ultratech: 61%
  NDTV: 58%
  India Cememt: 55%
  HDFC Bank: 27%
  Sesa Goa: 26%
  NTPC: 25%
  DLF: 25%
  R Power: 20%

Markets This Week

• Sensex down 4%, Nifty down 3.7%
• Sensex down nearly 1200, Nifty down nearly 325 points from weekly highs
• CNX Midcap Index down 3.5%, BSE Small Cap Index down 2.5%
• BSE Cap Goods, Oil & Gas, Realty, Metal Indices down 5%
• BSE Bankex down 3.5%; SBI down 6.2%, ICICI Bank down 4.2%, HDFC Bank down 2%
• Index losers: RIL down 7.5%, Bharti down 6%, Rel Comm down 9.5%, TCS down 5%, DLF down 4.5%
• Non-Index losers: IFCI, Chambal Fert down 11%, RNRL down 7.5%, Nagarjuna Fert down 8.2%, RPL down 4.3%
• Non-Index losers: IDFC, GHCL down 10%, Mercator down 12.5%, Punj Lloyd down 9%
• Non-Index Gainers: Sasken Comm up 15%, Bajaj Hind up 5%, SRF up 8%